The chancellor bit into benefits for the poor with millions of families affected by the cuts. He also announced plans to increase the retirement age to 67 in a move that will affect around 8 million people aged between 42 and 51.

As well as reductions to child tax credit saving £975m a year, 2 million households will be affected by freezing another part of the working tax credit system – affecting couples and lone parents – from next April. This part of social security is worth £1,950 a year and should increase in line with inflation. But freezing the benefit will save the Treasury £265m. This comes at a cost: by holding down payments, working families will see their income reduced by a further £100.

The charity Family Action also warned of a series of smaller cuts which penalise the poor. These include forcing couples receiving working tax credits for 16 hours' work to find another eight hours of employment to continue to receive it from April.

Family Action's chief executive, Helen Dent, said: "All in all, the outlook for the poorest families is grim in 2012 when we remember that housing benefit cuts start to kick in from January, unemployment is forecast to rise next year, and economic growth is practically at a standstill. This is in addition to the rest of the small print on working tax credits which the chancellor did not remind us of."

The Treasury admits that its measures will result in an extra 100,000 more children falling into poverty next year, adding to the sense that the government's policies are widening the gulf between rich and poor.

Many pointed out that inflation was pushing people into poverty, and there was little defence offered by the government.

Enver Solomon, policy director of the Children's Society, said: "Freezing elements of working tax credit and cuts to child tax credits will squeeze these families even further. Children in low-income families need to be protected from rising living costs. Instead, the chancellor has condemned thousands of low-income families to a winter of discontent, with many more to come." Many working with the poor pointed out that the latest cuts come after benefits had already been pared back. The government had frozen two other parts of the working tax credit and cut the childcare element from 80% to 70% of childcare costs from April 2011.

Pebble Padfield, a benefits specialist adviser at Cambridge Citizens Advice, said: "This move is absolutely insidious, because it's cumulative. Claimants are going to get poorer and poorer, and there's already no fat there to cut."

The government will raise the state pension age to 67 by April 2028 in a move it said would save the UK almost £60bn. The change, which had been widely anticipated, will be phased in over two years from April 2026. Originally the state pension age was set to increase to 67 by 2036, and the decision to bring the date forward will affect around 8 million people aged between 42 and 51 who had expected to be able to retire at 66.

Osborne said the move was in response to rising life expectancy and described it as "a measure to control spending [which] is not for today or for next year or even for the next decade".